“The greatest acquisition strategy in financial services today is cross-selling.” What a surprise! You could have read this same quote from Forbes (February 2012) 10 or 15 years ago. It’s amazing that banks are still averaging just a 2.10 cross-sell ratio to new customers (Forrester Research, October 2011). Credit unions cross-sell ratios aren’t much better. If you want your members to use more of your services, it is going to take desire and courage to try something new, and the commitment to implementing a system properly.
Understand the Core of the Problem
Many of your credit union’s members do not see a visit or interaction with you as beneficial or valuable. They aren’t necessarily “WOW-ed!” They want to go in, get their new savings accounts, checking accounts and debit cards, and get out as quickly as possible. Most have no interest in having a detailed conversation with the credit union’s employees.
And in many instances, unfortunately, many credit unions do not have the infrastructure, process or training in place for its employees to engage the members. Hence, the dismal cross-sell ratio. As a result, attrition rates at credit unions during the first 12 months of a new account relationship remain stubbornly high.
In order to actively engage members in the sales process, you must quickly articulate a compelling value proposition or they will scurry out the door. Getting consumers to open an account is only the first step in winning the long term relationship. But in order to do this, you should assemble checking product packages — or “bundles” (checking plus three additional products or services) — and provide some incremental, monetized value. That’s how you ask them to give you more of their business.
Yes, the checking account is the glue that holds everything together. As you know, a Primary Financial Institution (PFI) is defined as the location that holds the person’s checking account. And credit unions need more of their members to use them as the PFI.
One bank, in particular, has done an outstanding job with this concept. In Wells Fargo’s Q4 2011 earnings report, the bank says that 86% of all new customers took advantage of a package of products. Based on average cross-sell ratios in the financial industry, the average bank or credit union probably has no more than 10%-15% of new customers/members using four or more products.
The architect of the program for Wells Fargo was Tom O’Rourke. O’Rourke is now the director of Loyalty and Relationship Marketing at Dave Bocks & Associates Marketing in Denver. “The bundles program was very successful at Wells Fargo and once it was rolled out to our customers and our employees were trained on how to discuss the benefits of the bundles, we saw explosive growth and record cross-sell conversions,” O’Rourke said.
You don’t have to run the math to quickly recognize the phenomenal impact that moving from 10% up to 86% would have on your bottom line. Simply jumping from 15% to 30% can double your sales and profits. That’s the kind of improvement that’s off the charts.
Duplicate What Works
Hey, if Wells Fargo can do it… so can you. The requirement of purchasing four or more products is the ideal place to start. This target represents a relatively small commitment from financial consumers, yet the retention difference between those with 4+ products versus those with just 1-3 products is astounding.
It is paramount that your members understand the value of any bundled packages that are available. Think McDonald’s with their Happy Meals and Value Meals. Customers purchase these bundles of 3-4 products because the “bundles” are positioned so that customers get a deal vs. purchasing each item individually.
Creating your checking packages requires pulling four or five database reports: product penetration, onboarding cross-sell, member retention, and profitability. Analyzing these reports and using the data will enable you to determine your package mix and how to quantify the consumer value proposition in monetary terms.
But WAIT you say!! “We don’t have time to do all of this.” Our response: “Not a problem! You shouldn’t be doing this alone in the first place. There are a lot of working parts that have to be in sync to make this program successful” and there are people out there who can help you.
Merchandise and Market the Heck out of Your New Value Proposition
Provide sales support, merchandising, point-of-sale, lapel stickers, and communication materials that generate customer interest and make it easy to understand the benefits and value of the bundles. You will find new customers much more engaged in the sales process as they actively seek out the package best for them. This results in more engaged, productive, and successful bankers …and bigger sales and profits.
Create an Accountable, Package-Selling Culture
Applying a “package” approach should be relatively easy to do, especially if you are profiling members with an assessment of their needs during the sales process.
Training is a key element of a successful bundling or cross-selling program. You can’t just throw the employees “into the fire” and tell them to talk about the bundles. They need to know how to do it properly. They need training on building relationships and non-pressure selling. Front line must be able to easily grasp the “bundle” strategy, and see its value — both to the organization and to consumers. It needs to become second nature to them, resulting in fewer “coaching moments” and more “atta boys.”
Of course, for this to work you must establish clearly defined, measurable goals. Here’s a reasonable place to start: Take the percentage of new members acquiring 4+ products in their first 12 months, and double it. Make that your goal. Take a look at this example:
- Before “bundled” packaging: Credit Union XYZ opens 5,000 new checking accounts annually. 15% of those are opened with three additional products, with an average profit per product of $40. So, 750 DDA’s x 4 products x $40 = 3,000 sales and $120K profits.
- After “bundled” packaging: 30% of checking accounts are opened with three additional products with an average profit proxy of $40. 1,500 DDAs x 4 products X $40 = $6,000 sales and $240,000 in additional profits annually.
As you can see, engaging members leads to mutually beneficial conversations, which in turn lead to significant increases in sales, profits and member retention.